UAE SUPPORTS STELLAR FINANCIAL GROWTH IN PAKISTAN
SAAD ANWAR HASHMI
Mar 12 - 18, 2012
Pakistan and UAE are two markets, which are regarded as one of the strongest in the region with financial sector growth and number of financial institutions offering services. The UAE has an influx of banks and continue to have a footprint of international banks. UAE and Pakistan ties have been strong with frequent international meetings to promote trade and commerce between both countries. As Pakistan needs investment in capital-intensive projects and if infrastructure development, international investors are constantly attracted to develop such projects, which will assist the government with its budgetary deficits.
Currently, 27 companies are operating in Pakistan with trade volume of over USD7.5 billion between Pakistan and the UAE.
Pakistani delegations to the UAE encourage the investors to invest in all sectors in Pakistan especially utilities along with power and energy which is the prime need of the country.
Pakistan's advantage with the UAE includes strong cultural ties and a large workforce with careers in the Emirates giving additional comfort. With further geographic proximity from Pakistan, UAE investors find opportunities and are more than willing to invest provided law and order situation, political uncertainty and currency fluctuation minimized at the earliest possible.
Based on the economic situation of the country and a poor tax base, Pakistan requires investment in building of dams and infrastructural development, which will attract foreign investments in the future. The largest investment done to date in Pakistan by the UAE has been in the telecom sector with number of mobile phones considering a population of 180 billion, which will drive demand.
It is estimated that the UAE has invested USD21 billion in the Pakistani economy in various projects which can be doubled over the next 5 years considering the stability of the economy.
Considering the industrial growth in the UAE and opening up of new businesses, it is further expected that the UAE will bring investments in construction with concentration on oil and gas development and exploration. As witnessed in Dubai based on projects attracting tourists, the UAE is considering the development of the northern areas of Pakistan and construction of mega malls similar to those seen in Dubai to attract tourists. Since the parity of Rupees against the Dollar averages 90.02 to 90.80, Pakistan can offer a venue for cheap vacations and shipping by foreigners if exploited to the maximum possible.
Pakistan offers natural resources and is known as an agriculture based economy. Gemstones found in Northern Pakistan can contribute an estimated USD400 million per year if specialized mining and skill set is directed to use such resource to earn foreign exchange. For the UAE, revenue from development of such natural resources may ensure long-term business growth.
Pakistan and UAE relations have particularly improved under the leadership of late Sheikh Zayed bin Sultan Al Nahyan, H.H. Sheikh Khalifa Bin Zayed Al Nahyan, Sheikh Mohammed Bin Rashed Al Makhtoum and Sheikh Mohammed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi. The impact of such relationships on the financial sector is large, since the inflows to Pakistan from the UAE will not only help build foreign exchange reserves but will also assist banks earn commission to establish letter of credit to assist in project development.
Funds to Pakistan may be directed through DFIs or commercial banks where investment and corporate banking may execute large scale syndicate transactions to assist in capital expenditure in Pakistan. The influx of trade with the UAE will assist banks in Pakistan to book trade business and improve the bottom line in terms of profitability.
Promoting relations and enhanced business with capital expenditure will develop Pakistan's financial sector since the business will be routed through local banks for projects.
Steps have consistently been taken to impart knowledge to businessmen in Pakistan and the UAE to guide them in establishing businesses in Pakistan and have deep understanding of the domestic financial sector.
Seminars and meeting are frequently conducted in consultation with Pakistan's Embassy in the UAE, Ministry of Commerce and Pakistan Business Council to explore investment avenues domestically.
Trade and commerce and capital expenditure by companies in the UAE will strengthen the banking relation of the financial sector in Pakistan with the UAE.
Recognizing the skill set and the knowledge of human capital in Pakistan through these relations will further be recognized to encourage more Pakistanis finding career opportunities in the UAE which has been witnessed year on year. Though brain drain is never encouraged, considering career opportunities in the UAE will improve worker remittances in Pakistan and assist in building of reserves.
Our current financial sector corresponds with banks in the UAE building the comfort required. Highlighting banks including multinationals and large private banks including UBL and HBL have strong footing in the UAE.
NBP being the largest bank in Pakistan in terms of asset base is recognized on a global scale. In addition to vigilance of SBP and our banking not exposed to international derivatives and structures leading to the subprime crisis has ensured stability of our financial sector which will encourage domestic banks in the UAE to carry transactions with banks in Pakistan without incurring high risk.
If viewed from the macro level, stability of Pakistan's economy and improvement in law and order will provide a positive outlook to investors in the UAE. Inflows in the form of investments and capital expenditure will improve relations with banks in the UAE market. With increase in trade business, banks in Pakistan will be able to establish L/Cs to book volumetric commission and trade business, which will result in profitability. Relations with the UAE may be further strengthened with currency stability to ensure returns for UAE investors driven through strong political ties between both countries.